Bank of America to decide Boreyko’s proposed short sale
Amid questions of why Boreyko sat on his proposed short sale for six weeks before notifying the SEC, and whether or not the short sale of property would violate the terms of the Vemma preliminary injunction, the likelihood of Boreyko’s proposed short sale being granted were slim.
With a requested transaction date of January 18th, Boreyko had requested an expedited decision on the matter. This request was granted, with Judge Tuchi today denying Boreyko’s short sale proposal.
In not so many words, Tuchi was less than impressed with Boreyko’s calculated strategy of delaying disclosure to the FTC and court.
The Court agrees with the FTC that Mr. Boreyko’s last-minute request for the FTC’s stipulation or the Court’s approval of a transaction known to implicate the terms of the Preliminary Injunction was entirely unnecessary, given that Mr. Boreyko executed the Purchase Agreement six weeks ago.
Again, in not so many words, Tuchi warned Boreyko that manipulative motions going forward would not be tolerated.
The Court has over 200 active civil actions before it, many with pending matters, and, under the Court’s inherent authority to manage its docket, it will not countenance further unnecessary last-minute motion practice by the parties in this action.
Central to the FTC’s response to Boreyko’s sale proposal was the contention that he might have mislead Bank of America.
The FTC sees the value in a reduction of Mr. Boreyko’s indebtedness through the short sale but raises concerns that Mr. Boreyko did not fully disclose the state of his assets to his lender, Bank of America, in the preparation of the Purchase Agreement.
Specifically, the FTC states that Mr. Boreyko provided the bank with a hardship letter on December 9, 2015, that stated that the FTC had frozen his company and personal assets but did not state that the freeze of his assets other than real estate was only temporary and was lifted by the Court in September 2015.
Moreover, it is not clear whether Mr. Boreyko disclosed to the bank the liquidation of his interest in Arizona Production & Packaging, LLC, which may have given Mr. Boreyko access to significant funds.
The FTC argue that if the bank were aware of Boreyko’s non-frozen assets, they might not have accepted Boreyko’s letter of hardship.
Boreyko contended that the bank would have been aware of the status of assets, because
the Court ordered the FTC to serve a copy of the Order dissolving the asset freeze on all applicable financial institutions.
The FTC did acknowledge the logic behind the sale however, with the court also agreeing and making an exception to the terms of the preliminary injunction.
Because the proposed short sale will reduce Mr. Boreyko’s indebtedness, making him more able to satisfy other obligations, the Court approves of the short sale in principle as an exception to the terms of the Preliminary Injunction.
because Mr. Boreyko’s hardship letter does not indicate that the asset freeze was only temporary, and because Mr. Boreyko’s Motion asks the Court to approve of the short sale, the Court will require Mr. Boreyko to provide the lending officer involved in the proposed short sale at Bank of America with a copy of this Order together with a statement clarifying that the asset freeze he referred to in his hardship letter was lifted in September 2015.
Once that disclosure has been made, it is for Bank of America to determine whether it will proceed with the short sale.
By the close of business on January 15th, Boreyko has been ordered to provide the Bank of America lending officer with the information above. The case docket reflects a notice filed by Boreyko that this was done.
Should Bank of America wish to proceed with the sale in light of there being no doubt as to their awareness of Boreyko’s access to assets, the proposed short sale is granted.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of Judge Tuchi’s January 15th order.
Update 21st January 2016 – Bank of America appear to have signed off on the sale, with Judge Tuchi signing of on Boreyko’s proposed sale.
The order was made and filed on January 19th.